On Monday the Jilin Food and Drug Administration (JFDA) revealed a Chinese drug maker had supplied substandard vaccines. This triggered much debate on social media, some of which was censored. Then YLZ Information Technology was quoted in Chinese media as saying it was exploring blockchain to enhance vaccine safety according to the South China Morning Post. The result was a spike in its share price of more than ten percent (see update).

The scandal

The scandal broke ten days ago when the State Drug Administration (SDA) found problems with a rabies vaccine. Changchun Changsheng Biotechnology (CCB) produces 23% of China’s rabies vaccines. The company allegedly fabricated production documents and inspection records. It also modified process parameters and equipment. The SDA revoked the company’s license to produce the vaccine.

Just last week court documents show the conviction of a company sales representative for bribing the head of Changling disease control center. The company was previously state-owned but was privatized in 2003.

As a result of the rabies vaccine discovery, there were further investigations. The JFDA revealed that CCB was selling substandard vaccines used on babies as young as three months old. The DPT vaccines were against diphtheria, whooping cough, and tetanus.

But last November the SDA revealed ineffective DPT vaccines produced by another company Wuhan Institute of Biological Products. In both cases, the vaccines form part of a compulsory public health program.

Chinese President Xi Jinping stepped in telling the authorities to “improve the supervision of vaccines and guard the bottom line of safety in order to safeguard public interest and social security”.

History of issues

In 2016 police arrested 37 people for illegal sales of vaccines. In that case, the drugs were expired or improperly stored.

Six years earlier the China Economic Times broke a story that four children died from improperly stored vaccines between 2006 and 2008. Plus seventy other children fell ill. There was quite a bit of pushback from the drug watchdogs. They argued that the passage of time made the cause of death hard to prove.

Unrelated to vaccines, in 2008 there was a Chinese milk scandal involving contaminated infant formula. Six babies died from kidney damage, and 54,000 were hospitalized.

How blockchain can help

Blockchain can help to prevent tampering of documents. For example, if there’s an inspection and the results are stored on a blockchain, then multiple parties will have a record of the inspection. So it would be hard to change the inspection report subsequently.

Documents usually contain individuals names so they may be more reticent to participate in corruption. However, that disincentive only works if there’s sufficient transparency and the blockchain is available for broader inspection.

With the DPT baby vaccines, one of the most significant questions was how many vaccines have already been dispensed? Blockchain can help with tracking and tracing drugs.

Both Europe and the US are phasing in legislation for drug traceability. Pharmaceutical companies have to add serial numbers to all packaging. In the near future, a pharma company will know which drugs have been consumed. SAP is working on a project for returns, and MediLedger has a similar but broader project.

Blockchain is only part of the solution

While blockchain can help with document tampering, it won’t prevent a drug company bribing an inspector. In that case a false document will be added to a blockchain. The name of the person who signed the false document might be a bit more public, but it won’t prevent the fraud.

The only real solution to the inspection issue is to have multiple independent parties involved with inspection and perhaps random tests at the dispensing level. That’s not cheap. But it also becomes prohibitively expensive for an unscrupulous manufacturer to bribe many inspectors. There must be a point at which it pays to be honest.

While blockchain can’t solve all the problems, the combination of tamper-proofing, transparency, and track and trace are steps in the right direction.

Update

Following the share price spike, the Shenzhen Stock Exchange contacted YLZ Information Technology asking for more information. They want to know about the company’s expertise in blockchain technology including personnel, capital committed, and patents. They’ve also asked for details about any cooperation with Ant Financial (part of Alibaba).The company has until tomorrow to respond.

If you’re interested in learning more about Blockchain and Pharma Supply Chain, Hanson Wade is running a conference in Boston in October. The link includes a 10% ticket discount. We’ve found Hanson Wade events have strong speakers, hardly any sponsor promotional content, and provide excellent networking opportunities.

Ledger Insights is an event Content and Media Partner but this is neither a paid message nor do we earn a commission.